Brazil: The risks of a Bolsonaro presidency

Unleashing the unknown

byJimena Blanco, 29 October 2018

As we expected, extreme right-winger Jair Bolsonaro won Brazil’s presidential run-off. What else can be expected? We believe he will appoint Paulo Guedes, a favourite of the business community, as his new economy czar. Guedes will pursue deep, market-friendly reforms, including privatisations.

The short-term impact on economic growth will be positive. That said, below we highlight some of the big risks of a Bolsonaro presidency: violence, authoritarianism, and economic policy mismanagement.

Adding fuel to the fire?

One of the risks of a Bolsonaro administration is a rapid upsurge in Brazil’s already high levels of violence. Bolsonaro made crime a major issue in his campaign; indeed, the promise of safer streets has played a big part in winning him votes. But he has consistently supported so called ‘iron fist’ policies and defended police shoot-to-kill tactics. There are two problems with this.

First, hard line, ‘get tough’ policies have been relatively unsuccessful to date in stopping rising criminality. More nuanced policies are required, demanding not only police action but also an emphasis on prevention, accompanied by reform of the criminal justice system, and an overhaul of the country’s congested prisons.

Second, there is a suggestion that the rule of law simply will be put to one side under Bolsonaro. A worst-case scenario could see a Philippines-style surge in extrajudicial killings, and enduring high levels of criminal violence. For companies operating in Brazil, security risk could increase, therefore.

A second risk is whether Bolsonaro will follow the authoritarian (and ultimately anti-democratic) leadership style of other strongmen presidents such as the Philippines’ Rodrigo Duterte or Recep Erdogan in Turkey. Bolsonaro is on record as supporting military rule and has made many scathing and dismissive criticisms of Brazilian democracy.

Some supporters argue that these are no more than provocative and off-the-cuff comments made by an outsider candidate looking to criticise the political establishment and attract media attention. But his strongest critics fear that Bolsonaro’s rhetoric is just the tip of a very real underlying contempt for democracy. Ominously, in the last stages of the campaign, a video surfaced in which Bolsonaro’s son Eduardo (now a federal congressman-elect), is heard suggesting that the army could be sent to shutter the powerful (and fiercely independent) Federal Supreme Court (TSF). Bolsonaro senior disowned the comment.

Brazil’s system of institutional checks and balances is more robust than ever before and could contain and correct some autocratic tendencies from the executive. Yet, the strong presidential powers vested in the 1988 Constitution create a dangerous opportunity for abuse.

Economic uncertainty remains

A final set of risks centres on economic policy. We have a strong concern that Bolsonaro’s recent conversion to market-friendly policies, and his alliance with Chicago-school graduate Paulo Guedes, may not be long-lasting, with potential for a reversion to economic populism.

With a history of right-wing nationalism, Bolsonaro has often been protectionist and critical of foreign investment. Any falling out with Guedes would create major policy uncertainty.

With a highly fragmented Congress, it is not clear whether once in the presidency Bolsonaro will have the political will, or ability, to negotiate with the multitude of parties (30 in all) to get vitally-needed economic reforms approved. The key early indicator will be pension reform, critical to capping the fiscal deficit and growing public debt burden. From congress, Bolsonaro voted against the last attempt to reform the loss-making state pension system.

Finally, the candidate has given very mixed signals about his position on trade agreements. Bolsonaro has hinted that he might pull Brazil out of the Southern Common Market (Mercosur) and quit the Paris climate agreement, although both moves would take years to take effect. And given his political hostility towards China, Bolsonaro may also cool Brazil’s relationship with the BRICS, a risky strategy given that China is Brazil’s top commodity-export market.

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